Infosys Limited has approached the Karnataka High Court challenging a ₹414.88 crore show-cause notice issued by the Directorate General of GST Intelligence (DGGI).
The notice alleges that the IT major had incorrectly claimed input tax credit (ITC) refunds on services provided by its overseas branches, which the DGGI contends do not qualify as exports of services under the GST framework.
Table of Contents
Background of the Dispute
According to a regulatory filing made by Infosys on Thursday, the matter originated in May 2025, when the DGGI sought details about the company’s GST refund claims. Infosys stated that it had furnished all requisite information and had also held multiple meetings with officials to clarify its position.
Subsequently, on July 30, 2025, the company received a pre-show cause notice from the DGGI. In response, Infosys requested additional documents and more time to prepare a comprehensive reply. However, the company alleges that the DGGI did not grant the extension and proceeded to issue a formal show-cause notice on August 12, 2025, demanding ₹414.88 crore, excluding applicable interest and penalties.
Infosys’ Stand
In its filing, Infosys emphasized that it has evaluated the merits of the notice and sought expert advice from external tax consultants and legal counsel. Based on this advice, the company filed a writ petition before the Karnataka High Court on September 19, 2025, challenging the validity and procedural propriety of the DGGI’s action.
The company further clarified that no tax demand currently exists against it in connection with this matter, as the dispute is still at the show-cause notice stage. Infosys maintains that its refund claims were lawful and in line with GST regulations, asserting that services rendered by its overseas branches constitute export of services eligible for refund.
The Core Issue
At the heart of the dispute lies the interpretation of “export of services” under the Goods and Services Tax (GST)regime. The DGGI’s position appears to be that services performed by foreign branches of an Indian entity for overseas clients do not meet the export criteria, thereby making the input tax credit refund claimed by Infosys inadmissible.
Tax experts note that similar disputes have arisen in other sectors as well, where authorities question whether overseas branches of Indian companies qualify as separate establishments or extensions of the same legal entity. The outcome of this case could therefore have significant implications for the IT industry, which often operates through branch or subsidiary structures abroad.
What Lies Ahead
The matter is now pending before the Karnataka High Court, which will examine the legitimacy of the DGGI’s notice, including whether the department acted within its jurisdiction and whether the services in question indeed qualify as exports under GST law.
As of now, Infosys has reiterated that it remains fully compliant with tax regulations and will continue to cooperate with authorities while pursuing appropriate legal remedies.
Read More: Centre Mulls Allowing Refund of Unutilised ITC on Capital Goods under Inverted Duty Structure
